Alphabet Q2 2025 earnings preview: AI competition and cloud growth in focus

When is Alphabet reporting Q2 2025 earnings?

Google's parent company Alphabet will release its financial results for the second quarter of 2025 at 1.30pm Pacific time after the US market closes on Wednesday 23 July.

Alphabet has established itself as one of the world's most valuable companies through its dominant position in online search and advertising. The company's diverse portfolio includes Google Search, YouTube, Google Cloud, and emerging AI technologies that are reshaping the digital landscape.

The tech giant's earnings will provide crucial insights into how the company is navigating increased competition in artificial intelligence and search.

Alphabet earnings expectations for Q2 2025

In the previous quarter's earnings report, Alphabet exceeded analyst estimates with impressive performance across key metrics. The search giant continued to see revenue growth sustained at low to mid-teens levels, driven by resilient advertising revenue and robust growth in YouTube subscriptions.

Google Cloud delivered particularly strong results in Q1 2025, with revenue increasing by 28% year-on-year (YoY), catalysed by AI demand from enterprise customers. Operating margins improved significantly from 31.6% in Q1 2024 to 33.9% in Q1 2025, supported by multiyear record-high margins for both Google Services and Google Cloud.

As a result, net income increased by 46% YoY, demonstrating the company's operational efficiency. However, the previous quarter benefited from an unusually large $9.8 billion gain on equity securities, which boosted other income significantly.

For Q2 2025, analysts expect growth to moderate, with revenue projected at $93.8 billion (+10.7% YoY). Net income is expected to decline from last quarter to $26.5 billion, but maintain YoY growth of 12.2%. Operating margin is projected to improve from the previous year's 32.4% to 34.1%.

Figure 1: Financial results expectations

AI competition threatens search dominance

The rise of ChatGPT and other AI platforms has created unprecedented challenges for Google's search business. These new competitors offer conversational interfaces that provide intellectual answers to complex questions, potentially reducing users' reliance on traditional search engines and the advertising revenue they generate.

Alphabet's forward 12-month price-to-earnings ratio has compressed from a five-year average of 22.6x to 18.3x, reflecting investor concerns about the company's ability to maintain its search dominance.

To counter these threats, Alphabet has launched Gemini 2.5 Pro, its latest generative AI model. LMArena has ranked it as a leader among AI peers including OpenAI's models and Claude Sonnet 4 across areas like creative writing, coding, and visual processing.

The company has leveraged its vast user base across its products, including Android, to drive AI adoption, with half a billion users now using Gemini models. AI Overview, integrated into Google Search, has reached 1.5 billion monthly users, demonstrating the company's ability to enhance its existing products with AI capabilities.

Investors will be closely watching if Alphabet can continue to expand on the user base of its GenAI model without cannibalising the traditional Search base. This delicate balance between innovation and protecting existing revenue streams will be crucial for the company's long-term success.

Cloud business drives growth ambitions

Google Cloud represents Alphabet's biggest growth opportunity, with the division expected to expand revenue by 26% year-on-year in Q2. The cloud business has been gaining market share from competitors Amazon and Microsoft, improving from 10% in Q1 2023 to 12% in Q1 2025.

Innovation in AI enterprise solutions will be crucial for Google Cloud's continued success. The company's ability to integrate cloud offerings with other Google products like Workspace provides a competitive advantage that rivals find difficult to replicate.

The proposed $32 billion acquisition of Wiz would enhance Google Cloud's security capabilities, addressing a key consideration factor for businesses selecting cloud providers. Enhanced security features are increasingly important as companies migrate sensitive data and applications to cloud environments.

Investors will be watching for management updates on the Wiz acquisition and the company's strategy for further gaining market share. The cloud market remains highly competitive, with significant opportunities for companies that can effectively combine AI capabilities with robust infrastructure.

Anti-trust challenges create regulatory risks

Alphabet faces significant anti-trust challenges across multiple jurisdictions that could fundamentally impact its business model. In the US, the company is defending against allegations of illegally monopolising both the search engine market and online advertising markets.

Court rulings from ongoing remedies trials could have substantial consequences for Google's operations. One proposed remedy involves forcing Google to divest its Chrome browser, which would significantly impact the company's search revenue and user data collection capabilities.

In Europe, the EU's General Court has issued a €4.1 billion fine for exploiting Android's dominance to provide unfair advantages to Google's own apps. While the company continues to appeal, the likelihood of substantial financial penalties remains high.

The outcomes of these legal proceedings will be closely monitored by the market when assessing the company's long-term prospects.

Analyst outlook and price targets

Wall Street sentiment remains largely positive despite the challenges, with 43 out of 55 analysts maintaining 'buy' or 'strong buy' ratings according to LSEG data. However, the average target price has declined from approximately $215 in March to $202.05, reflecting increased uncertainty. The current analyst consensus suggests potential upside of 11% from recent trading levels.

TipRanks data shows a neutral Smart Score, with positive analyst ratings balanced by concerns about hedge fund positioning and technical momentum.

Figure 2: Wall street analyst estimates

Figure 3: TipRanks smart score charts

Among the 'Magnificent Seven' technology stocks, Alphabet ranks fifth in year-to-date returns. The company's price-to-earnings ratio is the lowest in the group, indicating market concerns about competitive and legal challenges.

Figure 4: Valuation and performance of the 'Magnificent Seven'

Technical analysis ahead of earnings

The daily price chart presents a moderately positive technical picture, with the rebound from April's lows dominating recent price movements. The recent cross of the 20-day simple moving average (SMA) above the 200-day SMA confirms the bullish trend remains intact.

A better-than-expected earnings report could drive the share price towards $194, which aligns with the top of the ascending channel. This level represents a key resistance area that could determine whether the stock can extend its recent gains.

Conversely, disappointing results could see the stock testing support near the 200-day SMA at $172.9. This level may prove crucial for determining whether Alphabet can maintain its bullish trend in the coming months.

The technical setup suggests the earnings announcement will be pivotal for near-term price direction. Traders should monitor both the fundamental results and the stock's reaction to key technical levels for trading opportunities.

Figure 5: Alphabet's (Class A) daily price chart

• _{This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}